Consumer-led economy needs happy investors

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[Former chief executive Tung Chee-hwa] said that over the next 20 years the mainland's economy would move from one driven by exports to one driven by domestic consumption that emphasised value-added service industries.

SCMP, June 27

Sometimes I'm glad that I write a column for this newspaper and don't have to come up with a cartoon every day like my colleague Harry Harrison. I'd be stumped on how to portray Ah Tung. The 1950s crew cut, yes, but how do you get across the essence of 'I am the mouth of Beijing'?

We have a well-recognised Hong Kong phenomenon here. Daddy makes it super-rich, and son doesn't really have to do more for a living than step into the office every now and then, which makes him a man of sweet, amiable disposition, infrequently challenged intellect and utterly conventional opinion.

I'm inclined to think that a bell would go off somewhere if Ah Tung ever came up with an original thought - 'Brrrinnng! Your attention, please! A new neural connection has just been established, the first since full appreciation in Primary 4 of the truth that one plus one equals two.'

I saw no evidence of such an unusual event in the yawn of an interview with him that we published yesterday. He's still a busy man, we're told. Really? Why?

But because he reflects present Beijing thinking like a highly polished mirror, it is worth considering his assertion that the emphasis of the mainland economy will swing from exports to consumer services. It has to be the official line up north if Ah Tung has been coached to parrot it.

We'll take the export angle first. Yes, it's true that export growth is slowing, but that's the story right across the world just now, and the mainland's export growth rate is still the highest I could find of anything but midget economies.

The trade surplus is also holding steady, at an impressive US$170 billion a year. This engine is still powering along on all 12 cylinders.

And as to how much priority Beijing really accords the consumer, the first chart shows you that household consumption expenditure on the mainland has steadily declined for decades as a percentage of GDP. The ratio is almost as bad now as Singapore's. Goodness me, what a sad fate.

But, of course, things can change. I can't deny the possibility. Perhaps Beijing has had a change of heart. Perhaps the leadership has decided to adopt a kindlier approach and allow people to make their own spending choices instead of always foisting the decision on them. Perhaps the Pope has turned Protestant.

But if it were to happen in the mainland, people would first need to build up the financial resources that they could devote to their own uses, which would mean that their investments would have to pay off. This should be no obstacle in so fast-growing an economy, you would think.

I now refer you to the second chart. That line crawling along the bottom with one brief blip in 2007 represents the Shanghai Composite Index. The stock market stands exactly where it stood 11 years ago. The top line shows you that nominal gross domestic product has grown almost fivefold over the same period.

Yes, bit of a mystery that, somewhat of a disconnect. One of these two must be wrong. Perhaps it's the Shanghai market and, if I jump in now, that index will rocket to over 10,000 tomorrow from the 2,200 level now. Wouldn't that be nice?

Then again, perhaps we have evidence here of a critical resource gap in the China consumer story.